Jam v. Int'l Fin. Corp., Civil Action No. 15-612 (JDB)

• Citation: 442 F.Supp.3d 162
• Decision Date: 14 February 2020
• Docket Number: Civil Action No. 15-612 (JDB)
• Parties: Budha Ismail JAM, et al., Plaintiffs, v. INTERNATIONAL FINANCE CORPORATION, Defendant.
• Court: U.S. District Court — District of Columbia

442 F.Supp.3d 162

Budha Ismail JAM, et al., Plaintiffs,

v.INTERNATIONAL FINANCE CORPORATION, Defendant.

Civil Action No. 15-612 (JDB)

United States District Court, District of Columbia.

Signed February 14, 2020

Jonathan Gaynor Kaufman, Marco Simons, Michelle C. Harrison, Richard Lawrence Herz, Pro Hac Vice, Earthrights International, Washington, DC, for Plaintiffs.

Dana Evans Foster, Francis A. Vasquez, Jr., Jordan Helton, Pro Hac Vice, Maxwell J. Kalmann, Pro Hac Vice, White & Case LLP, Jeffrey T. Green, Sidley Austin LLP, Marisa Sara West, U.S. Attorney's Office for the District of Columbia Sex Offense and Domestic Violence, Washington, DC, Matthew J. Letten, Day Pitney LLP, Hartford, CT, for Defendant.

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge

Residents of Gujarat, India and other local community stakeholders seek to hold the International Finance Corporation ("IFC"), an international organization, liable for property damage, environmental destruction, loss of livelihood, and threats to human health arising from the construction and operation of the coal-fired Tata Mundra Power Plant in Gujarat, India. This Court previously dismissed plaintiffs' suit based on binding D.C. Circuit precedent that international organizations enjoy absolute immunity under the International Organizations Immunities Act ("IOIA"). The D.C. Circuit affirmed this Court's decision, but the Supreme Court reversed and remanded the case, holding that international organizations do not enjoy absolute immunity; instead, they enjoy the same immunity as is enjoyed by foreign governments under the Foreign Sovereign Immunities Act ("FSIA").

Back before this Court, IFC has filed a renewed motion to dismiss plaintiffs' complaint. IFC raises the same grounds for dismissal as before but now argues that IFC is immune from suit even under the more limited immunity granted to foreign governments under the FSIA. Plaintiffs counter that IFC is not immune because the suit falls under the FSIA's commercial activity exception. For the reasons explained below, this Court concludes that the commercial activity exception does not apply here because plaintiffs have failed to establish that their suit is based upon conduct carried on in the United States. Accordingly, IFC is immune from this suit and plaintiffs' complaint will be dismissed.

BACKGROUND

IFC is a public international organization with 185 member countries, including the United States and India, that seeks "to further economic development by encouraging the growth of productive private enterprise in member countries, particularly in the less developed areas." Articles of Agreement, Ex. 4 to Decl. of Leslie Sturtevant ("Sturtevant Decl.") [ECF No. 40-9] Art. I; Def. IFC's Mem. of Law in Supp. of its Renewed Mot. to Dismiss the Compl. ("Def.'s Mot.") [ECF No. 40-1] at 3. IFC finances "private enterprises which would contribute to the development of its member countries by making investments, without guarantee of repayment by the member government concerned, in cases where sufficient private capital is not available." Def.'s Mot. at 19.

IFC is committed to investing in "sustainable projects" and ensuring that "the costs of economic development do not fall disproportionately on those who are poor or vulnerable, that the environment is not degraded in the process, and that natural resources are managed efficiently and sustainably." IFC's 2006 Policy on Social & Environmental Sustainability, Ex. 2 to Decl. of Richard Herz ("Herz Decl.") [ECF No. 45-7] at 2. The organization's "Performance Standards on Social & Environmental Sustainability" create a framework for the assessment, avoidance, and mitigation of environmental and social risks. IFC's 2006 Performance Standards on Social & Environmental Sustainability, Ex. 3 to Herz Decl. [ECF No. 45-8] at i.

Under IFC internal policy, "managing social and environmental risks and impacts in a manner consistent with the Performance Standards is the responsibility of the client," but "IFC seeks to ensure that the projects it finances are operated in a manner consistent with the requirements of the Performance Standards." IFC's 2006 Policy on Social and Environmental Sustainability at 1. As a result, "IFC's social and environmental review of a proposed project is an important factor in its decision to finance the project or not, and will determine the scope of the social and environmental conditions of IFC financing." Id. Additionally, after making an investment, IFC will "monitor" its investment by requiring the borrower to submit periodic Monitoring Reports on the project's social and environmental performance, conduct site visits, and review the project's performance. See id. at 5. If the client fails to comply with its social and environmental commitments, then IFC will work with the client to bring it back into compliance to the extent feasible, and if the client fails to reestablish compliance, IFC will exercise remedies where appropriate. Id. at 5–6.

This case arises out of IFC's investment in the coal-fired Tata Mundra Power Plant project, located on the Kutch coast of Gujarat, India, where traditional agricultural and fishing communities depend on the natural environment. Compl. [ECF No. 1] ¶¶ 1–3. The project was carried out by Coastal Gujarat Power Limited ("CGPL"), which is a subsidiary of Tata Power, an Indian power company. Id. ¶ 2. IFC loaned CGPL $450 million to develop the plant, which was estimated to cost $4.14 billion in total. Id. ¶¶ 2, 47.

Before investing in the Tata Mundra Power Plant project, IFC recognized that the development of the Plant had "potential significant adverse social and/or environmental impacts that were diverse, irreversible or unprecedented." Id. ¶ 48; Compliance Advisory Ombudsman Audit Report ("Audit Report"), Ex. 14 to Sturtevant Decl. [ECF No. 40-19] at 4–5. IFC conducted an environmental and social review of the project in which it identified a number of performance gaps that needed to be addressed to ensure the project was carried out in accordance with IFC standards. Compl. ¶¶ 50–51; Audit Report at 16.

Hence, before closing the deal on IFC's $450 million investment, IFC and CGPL developed an Environmental and Social Action Plan to address those gaps, and the plan was incorporated into IFC's loan agreement with CGPL along with other environmental guidelines. Compl. ¶ 51; see also Loan Agreement Between CGPL & IFC ("Loan Agreement"), Ex. 1 to Decl. of Karim Suratgar [ECF No. 40-4] at 91–92. The loan agreement was negotiated in Mumbai, India, approved by IFC's board of directors at IFC's headquarters in Washington, D.C., and then executed back in India. Sturtevant Decl. [ECF No. 40-5] ¶¶ 12, 17–21; Compl. ¶¶ 196–97.

Under the agreement, CGPL was required to design, construct, and operate the plant in accordance with IFC's environmental and social requirements, as well as other industry standards, and to implement diligently the Environmental and Social Action Plan. See Compl. ¶ 122; Loan Agreement at 91–92. Disbursement of the funds was contingent on IFC's approval of the project's construction plan, schedule, and budget. Loan Agreement at 74–75. Finally, the loan agreement provided IFC some authority over the project after the funds were disbursed. For example, IFC retained a right to access and inspect the project site and records, to conduct an independent audit to ensure compliance with its environmental and social requirements and, if necessary, to take corrective action. Id. at 91–92.

Plaintiffs in this case are: fishermen and farmers who live and work near the plant, suing on behalf of themselves and others similarly situated; a local trade union dedicated to the protection of fisherworkers' rights; and the local government of a nearby village. See Compl. ¶¶ 6, 13–15. Plaintiffs claim that the Tata Mundra Power Plant project has damaged their property, health, and way of life. See id. ¶¶ 7–11. For example, plaintiffs allege that the plant's cooling system has discharged thermal pollution into the sea, degrading the local marine ecosystem and resulting in the decline of critical fish stocks and other marine resources. Id. ¶ 7. The intake and outfall channels of the plant have also closed off access routes to traditional fishing grounds and caused sea water to contaminate the groundwater such that the groundwater can no longer be used by farmers for irrigation or as drinking water. Id. ¶¶ 7–8. Additionally, the plant's coal conveyor system causes coal dust and fly ash to periodically cover homes, burial sites, crops, salt resources, and fish laid out to dry, damaging agricultural production, polluting the air, and causing respiratory problems among the local population. Id. ¶ 9.

Plaintiffs claim their case arises out of "the irresponsible and negligent conduct of the International Finance Corporation in appraising, financing, advising, supervising and monitoring its significant loan to enable the development of the Tata Mundra Project in Gujarat, India." Id. ¶ 2. For support, Plaintiffs point to IFC's Compliance Advisor Ombudsman's ("CAO's") audit of the project, which concluded that IFC's environmental and social assessments did not adequately consider the project's impact on the local fisherman, and that IFC failed to address environmental and social compliance issues during its supervision of the project. Id. ¶¶ 153–55; Audit Report at 4.

Plaintiffs allege that IFC, despite knowing that the project would likely inflict serious environmental and social harm to the property, health, and livelihood of people living near the plant, chose to fund the project without taking reasonable steps to prevent or mitigate those foreseeable harms. Compl. ¶¶ 3–5. According to plaintiffs, IFC is "intimately involved in and has substantial control over the decisions concerning construction, design, and operation of the projects it funds," but IFC failed to ensure the Tata Mundra Plant was constructed and operated...